ECB Rumored To Fail 25 Banks In Stress Test

A confidential draft of the European Central Bank's stress test of eurozone banks has reportedly shown that 25 financial institutions failed the review.

The European Central Bank is reportedly set to fail 25 banks in an unprecedented health check of the eurozone's major financial institutions, a confidential communiqué seen by the Bloomberg news agency revealed Friday.



The ECB was quick to condemn the leak, saying any information about the audit's results was premature and "speculation."



Bloomberg said 105 banks passed the review, which examined banks' capital buffers to see if they could withstand another financial crisis without collapsing.



The review tested the resilience of banks' balance sheets as of Dec. 31, 2013 - and 25 were judged to be too weak, Bloomberg said. But since the end of last year, 15 banks have raised adequate capital to absorb any losses arising from another financial crisis.



The ECB will release the final results of its stress test this Sunday, nine days before it takes over as the euro currency bloc's banking supervisor. It is hoping its "comprehensive assessment" of eurozone banks will help it preempt any potential financial meltdowns.



As two previous European stress tests failed to foresee problems at lenders that eventually went bust, the ECB is pulling out all the stops to get this audit right. At stake is not only the ECB's reputation, but confidence in the eurozone banking system as athe whole.



cjc/nz (Reuters, AFP, dpa, http://www.bloomberg.com/)

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